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Tripartite Region Aims for Improved Trade Conditions

By Rian Geldenhuys***

NAIROBI, Kenya, June 7, 2011 (East African Business) — Efforts to form a free trade area involving three regional trade blocs are gaining momentum. The proposed Tripartite Free Trade Area (F-FTA) would increase intra-African trade and provide investors with a market of 700-million people. Rian Geldenhuys, reports on the proposed business regulations.

Africa is set to improve its image of being a notoriously difficult place to conduct business in. This is due to a drive by three regional trading groupings - the South African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC), towards deepening regional integration. SADC, COMESA and EAC are aiming to create a free trade area with 26 member states, known as the COMESA-EAC-SADC Tripartite Free Trade Area.

The COMESA-EAC-SADC Tripartite Free Trade Area is ambitious and aims to eventually establish a customs union, which will include the elimination of both tariff and non-tariff barriers for all traded goods. Member states of the COMESA-EAC-SADC Tripartite Free Trade Area will have to harmonise their customs procedures and trade facilitation measures (such as standards, sanitary and phyto-sanitary measures and rules of origin).

However, its aims are much more ambitious than ensuring free movement of goods within the free trade area. It is also envisaged that the free trade area will guarantee the free movement of services and business persons as well as the facilitation of cross-border investment.

Initially, liberalisation of services will only occur in priority sectors that facilitate trade in goods, such as communications, construction, energy, finance, tourism and transport. Service providers in the region stand to benefit substantially from gaining access to foreign markets from which they have, by and large, been prohibited from rendering their services with legal certainty.

In addition, the COMESA-EAC-SADC Tripartite Free Trade Area will eventually have harmonised competition laws. As such, member states will have to ban any prohibited practices, which may affect trade between Tripartite member states or has as its object the prevention, restriction or distortion of competition within the Tripartite Region.

The current draft Annex on Competition Policy and Consumer Protection contains details on prohibited abuse of dominance as well as prohibited practices between other players in the Tripartite Region, which may for instance have price fixing or market allocation as its objectives.

Mergers within the Tripartite Region will also have to be notified to the established authorities in a bid to gain insight into the competitive landscape within the region. Further consumer protection measures are also contemplated in the draft Annex and member states will have to establish working bureaus of standards, metrology conformity assessment and accreditation structures, which will verify the quantity, quality, nature or value of the goods traded within the Tripartite Region.

The first Tripartite Summit was held in 2008. Since then two versions of the Draft Tripartite Free Trade Agreement and its various annexes have been prepared, the latest drafts being finalised in December 2010. These drafts will form the subject matter of the actual negotiations by the 26 member states.

In May 2011, the COMESA-EAC-SADC Tripartite Ministerial Committee met and agreed on the draft roadmap for the actual negotiations. In terms hereof member states will have 6 to 12 months for preparing to negotiate whereafter they will have 24 to 60 months to negotiate on the free movement of goods and of business persons.

Only once the negotiations on the free movement of goods and of business persons have been concluded will negotiations commence on trade in services, intellectual property rights, competition policy, and trade development and competitiveness. The member states, however, recognised that trade liberalisation on its own is not effective and have thus agreed to negotiate on infrastructure development and industrial development.

There are already a number of infrastructure development projects being implemented or developed in transport, ICT, energy and water.

Further progress in the finalisation of the Tripartite Free Trade Agreement is expected to be achieved when the Tripartite Council of Ministers will meet on 12 June 2011 in Johannesburg.

***Rian is the director of Trade Law Chambers, a specialised trade law company that advises and supports clients. The company has a wealth of experience in international trade law and in particular trade regulation. (END)